Senate OKs $10.5 billion in Katrina aid

House gets bill Friday; spending hampers budget-cutting

WASHINGTON (MarketWatch) -- The U.S. Senate approved the Bush Administration's $10.5 billion Hurricane Katrina aid package Thursday night and sent it to the House of Representatives, which is expected to pass it Friday and send it to the president.

Congress was expected to approve the legislation late Thursday or early Friday. Lawmakers had been scheduled to return from summer recess on Tuesday, but moved that up to make sure enough money is available for the Federal Emergency Management Agency.

"It's enough to take us out a few weeks," said Josh Bolten, the White House Budget Director.

Bolten said the funds would be just a prelude to another budget request to come before the fiscal year ends on Sept. 21.

He said the administration has no idea what the Katrina disaster's final price tag would be for the government.

"It's almost impossible to gauge what will be needed to achieve recovery in New Orleans until it's drained out," Bolten told reporters.

Bolten also said the disaster would make it more difficult for the administration to stick to its budget reduction goals. He said trying to offset the costs elsewhere in the budget would be disruptive.

Bipartisan talks

President Bush spoke with the bipartisan congressional leadership by phone, and they all agreed that responding to natural disasters is "one of the essential responsibilities of government," Bolten said.

Of the $10.5 billion, FEMA will get $10 billion to replenish its general disaster relief account, which totaled $2.5 billion before Katrina hit. The Defense Department will get $500 million.

FEMA has been spending $500 million a day. The money is used for the whole range of federal rescue and relief efforts.

Homeland Security Secretary Michael Chertoff said the relief effort would be "very expensive."

He said his department already has entered into contracts for several billion dollars. "I can't predict what future expenditures are going to be, but that gives you some idea of the measure of resources that are involved."

Economic impact

Bush, after holding talks with Alan Greenspan and White House economic officials, said the economic impact of the hurricane would be temporary.

"In our judgment, we view this storm as a temporary disruption that is being addressed by the government and by the private sector," Bush said.

He also urged Americans to not hoard. "Don't buy gas if you don't need it," Bush said.

The Federal Reserve had no comment on the White House meeting.

Bush has also tapped his father and former President Bill Clinton to lead a fund-raising campaign for the victims of the hurricane, as they had done following the Indian Ocean tsunami last year.

Bush will tour the Gulf Coast region on Friday and meet with the governors of Louisiana, Mississippi and Alabama.

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